Operating The Corporation

a. Planning, Establishing and Achieving Objectives It is important to distinguish between a management function and a leadership function and be able to recognize which function a person is performing at any given time. In many small businesses one and the same person performs these two functions simultaneously. This chapter will focus more heavily on management functions. Planning. Once the objectives of the corporation are established, the manager begins to plan how those objectives will be accomplished. Strategic planning is as important for a small business as it is for a large business. A positive cash flow is generally halted by events that were not anticipated or planned for. Most small businesses have limited resources in the form of liquidity and management skills. Operating a small business on a marginal cash flow is therefore more risky than it is in a larger business. The manager of a small business needs to find his specific niche, focus on excellence in providing that particular service or product, and apply the maximum amount of his resources, (i.e. management skills and cash), to becoming a leader, if not the leader, in that particular area of service. The manager needs to focus on the future while making present business decisions. He needs to arm himself and his management team with all the available knowledge relating to his particular niche, he needs to abandon the things he did yesterday that were not productive, and he needs to continually ask himself, “What is my business?” and “What should my business be?” Establishing and achieving goals and objectives. For an existing business, the starting point in setting goals and objectives, is determining whether the present goals and objectives of the business should be maintained or abandoned. Abandoning non-productive activity and focusing on the future, acts as a stimulant for innovation and creativity. Once the manager focuses all his attention on this new way of thinking, new ideas, new goals and objectives, new possibilities begin to “pop up”, excitement and enthusiasm begin to surface, and the motivation to be successful drives the manager to initiate the plans necessary to attain the new goals and objectives of the business. This is a form of self-motivation - a vital element for success! The manager must then concern himself with clarifying the goals, establishing long term and short term plans to achieve those goals, and measuring the results with the proper systematic feedback and controls. b. Financial planning for the corporation In a not for profit corporation money can be raised by way of grants, (federal and local), donations, gifts, membership dues, and through fund raising projects. For profit corporations do not have these options, and they are faced with raising money for start up costs, operational costs and long term development costs. In most instances, the start up costs for a small business include attorney’s fees and filing fees to incorporate the business, lease deposits and renovation costs of the leased premises, purchasing machinery and equipment, purchasing stock, office furniture and supplies, etc. This money can be contributed by the incorporators of the business as loans to the new corporation.. Generally, it is in the form of a loan from a bank to the incorporator(s) and secured by the personal assets of the incorporator(s). The operational costs are the expenses to run the business on a day-to-day basis, pay salaries, replace stock in trade, and keep the doors of the business open. This means having a reserve, (either in personal cash or through an arrangement with your bank). This is the most critical time for a new business. The income from the business is uncertain and usually at it’s lowest, but the loans have to be repaid. Additionally, the manager may have given up his full time job to give sufficient time to the new business. One way to alleviate the financial burdens at this time is to make sure that all your research and initial planning are completed before you incorporate. Also, you need to maintain a strict operations budget to provide guidelines for the managers. The manager needs to plan for long term development while making present decisions for the corporation. However, these development plans should not be implemented until the initial set up costs are paid off, or there is a good potential for increased profits after the development. Further, the manager must have found his niche and have the long term and short term plans in place to move in tune with the development. Development may involve increased production of existing products and/or services or the addition of new product lines. This could result in a need for new management personnel. This may be the best time for the corporation to raise needed capital and attract the best persons into the corporation by offering them ownership in the business through the sale of corporate stock, (shares), rather than obtaining new loans from the banks.

c. Record keeping, systems and professional support Good management results in good record keeping. It is vitally important that proper records of the corporation’s activities be maintained on a daily basis. Not only should proper systems be in place, but there must also be properly trained staff to maintain those systems. In a not for profit corporation the application for non-taxable status requires that answers to very specific questions be provided. The information provided needs to be consistent with the minutes and projects of the not for profit corporation. Similarly, in the grant proposals, (applications), the projects and minutes of the not for profit corporation must establish that the corporation is fulfilling its role in accordance with the stated objectives, in order to qualify the corporation for exemption under that particular section of the tax code. In both the profit and not for profit corporations, proper financial records are a must. In additions to the financial budgets, income and expense statements, balance sheets and material budgets, etc., there should also be an audit system in place to determine if the records are properly maintained, and whether they accurately reflect the financial condition of the corporation. Corporations are also advised to maintain records of staff performance, discipline and termination. Lastly, no business is too small to set up a system for managing for results. This system assists the manager in determining if the methods used in delegating responsibility, assigning tasks and setting standards are working effectively to achieve the objectives of the corporation. Unless the manager is trained as an accountant, attorney, business consultant, etc., he needs to consult with these professionals as the needs arise. He should hire the best persons that he can afford for his business whether those persons are the aforesaid, or brokers, bankers or insurance agents. Copyright (c) 2004 Eugene Fitz-Ritson All Rights Reserved Miami, FL

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